Hedge fund TCI is Royal Mail's biggest shareholder

The controversial hedge fund, the Children’s Investment Fund (TCI), has
emerged as the biggest private shareholder in Royal Mail, thwarting Vince
Cable’s efforts to sell the delivery company to “blue chip” institutions.

Chris Hohn has run The Children's Investment Fund since 2003Photo: SARAH BROOK

The London-based hedge fund, known for its aggressive activism, has bought 58.2m shares or 5.8pc of Royal Mail, according to a regulatory filing.

TCI, whose boss Chris Hohn was described as a “locust” by German politicians, is the first to build a disclosable stake in Royal Mail. Sources said TCI was allocated stock in the offering of 330p a share on October 11. The hedge fund will be sitting on a considerable paper profit since the shares have jumped, although original stake is thought to have been less than 1pc. TCI has been “buying ferociously” in the market ever since. Shares in Royal Mail closed a 499p last night but have been as high as 538.5p since they listed.

Under stock exchange rules, TCI had to declare its stake when it reached 5pc of the company. The filing shows the threshold was reached on Friday.

Mr Cable, who has often criticised hedge funds for being short term investors, repeatedly insisted that Royal Mail would be sold to “long-term, blue chip” institutional investors. In the carefully managed sale process, only 300 institutional investors were allocated stock from 800 that applied.

Some 90pc of the institutional offering was allocated to institutions, including Fidelity, Standard Life, Threadneedle and BlackRock. Insiders said the Business Secretary had to be persuaded to allocate 10pc of the offering to hedge funds to ensure that the stock had enough liquidity when it listed.

Mr Hohn, who is also Britain’s biggest philanthropist having given away more than £1bn in five years, set up TCI in 2003. The fund was structured so that a proportion of its profits were given directly to CIFF, a children’s foundation run by Mr Hohn’s former wife, Jamie Cooper-Hohn.

Although intensely publicity shy, Mr Hohn, 46, has a reputation for being aggressive and ruthless with the management of the companies he invests in.

In 2005 he was labelled a “locust’’ when he successfully took on Deutsche Börse, scuppering its efforts to buy the London Stock Exchange. The affair made Hohn a hero in the London hedge-fund community but the scourge of many corporations.

Mr Hohn is credited with writing a letter to ABN Amro demanding its break-up, which led to the global takeover battle that was won by the Royal Bank of Scotland-led consortium. In August, Mr Hohn wrote to EADS demanding that the Franco-German defence group sells its 46pc stake in Dessault Aviation.